Paypal and Tax?

[barnz2k]

Hey there
Im wondering if anyone knows the deal with Paypal and Tax.
Having your friends or a couple of ebay users send cash to you through paypal is fine, but what if for example you have a "donations" paypal option on your website. And you start getting little bits of cash from various places around the world.
Eventually you 'withdraw' this from paypal into your aussie bank account.
Does this need to be declared at tax time? Can it be tracked?

And as far as I can tell, the only fees on paypal in this situation is the conversion fee from a foreign currency, at time of donation, and if you 'withdraw' cash less than $150.

Any power - paypal users here that can shed some light on this for me?

Thanks!!

Pete

 

[Prospector]

When Paypal transfers money into your savings account it appears as a credit. As the ATO has access to your savings account, if these transfers were happening regularly, or with a large amount then perhaps it could trigger a query?

 

[clowboy]

Why did you get the money?

If it is made from a hobby (donations implies this to some extent) then you should get away with paying no tax on it. (it would cost you more than you make/recieve to maintain your hobby)

If you make a profit in anyway (derive income) Ie your incomings outwiegh your outgoings then you are likely to have to pay tax on it.


SEE AN ACCOUNTANT.

 

[barnz2k]

thanks for response guys.
prosp
Yeh i guess if certain amounts started being credited that were large and or frequent it would get tagged. But they wouldnt see inside Paypal however that it was from various people.

CB
Why did I get the money?
Say it was for a forum/website and people were paying to join. And the money was going towards upkeep of the forum and anything related to the forum topics. (no its not a pr0n site haha)- I guess this would be like your first option and any income could be negated by the expenses anyways.

But if more money began coming in than was needed to pay for it, then it would become a profit...hmm..

 

[clowboy]

I think you can actually make a small profit and still have it classed as a hobby. Once you get to the point of making a profit and being classed as income, things like internet expenses would come into play and you would end up in front anyway.

As a hobby you cant claim expenses IE internet/computer costs etc.
As a business (income) you can.

So if the income is negligable then it is in the ATO's best interest not to have you declare it.

IN short though - declare everything to your accountant and let him work it out.

ATO website has this

http://www.ato.gov.au/youth/content.asp?doc=/content/66884.htm

Similar page

http://www.ato.gov.au/businesses/content.asp?doc=/content/66952.htm&page=2&H2

Tried to find a limit for how much money you can make before you cease being a hobby, but couldn't find it. hope this helps a bit.

 

[barnz2k]

Ok cool thanks for info!
Seems a little bit of a grey area. and yeah best to let the accountant decide - Was more that I wanted to get an idea of the situation before entering into it.
Still sounds doable.

I heard the aussie guy that won like 11million in that poker game a year or so ago would have been tax free, but he stupidly said on the news it recently became a profession instead of his hobby.. lost a good chunk of that 11! bet he was still happy though haha.

cheers.
Pete.